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This course, presented by Prof. Juran, offers an in-depth exploration of decision models essential for effective managerial decision-making. It covers key topics such as optimization and spreadsheet simulation, while detailing a seven-step process for effective decision modeling, including definition, data collection, and model formulation. Students will learn about various software tools like Microsoft Excel and specialized applications for decision analysis. The course also emphasizes the importance of constraints and objectives in decision models, equipping managers with practical skills for real-world applications.
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Overview • Web Site Tour • Course Introduction Decision Models -- Prof. Juran
2 Modules • Module I: Optimization • Module II: Spreadsheet Simulation Decision Models -- Prof. Juran
Formulation Real world System Decision Model What is Decision Modeling? Decision Modeling Process Deduction Implementation Interpretation Real World Conclusions Model Conclusions Decision Models -- Prof. Juran
Seven-step Process • Definition • Data Collection • Formulation • Model Verification • Selection of an Alternative • Presentation of Results • Implementation Decision Models -- Prof. Juran
Revised Process for This Course 0. Conclusions and Recommendations 1. Managerial Definition 2. Formulation 3. Solution Methodology 4. Discussion? Appendices? Decision Models -- Prof. Juran
Software • Microsoft Excel • Data Table • Goal Seek • Solver • Premium Solver, SolverTable • Analysis Toolpack • Charts and Graphs Decision Models -- Prof. Juran
Software • The Decision Tools Suite • @Risk • PrecisionTree • TopRank • BestFit • RiskView • StatPro Decision Models -- Prof. Juran
Software • Other Software • Crystal Ball • Extend • Sigma Decision Models -- Prof. Juran
Descriptive Model • Approximates how a real system works (or would work) given certain assumptions • Does not give us the “right answer” • Focus for Module 2 Decision Models -- Prof. Juran
Prescriptive Model • Identifies the “right answer” • Focus of Module 1 Decision Models -- Prof. Juran
What is Optimization? • A model with a “best” solution • Strict mathematical definition of “optimal” • Usually unrealistic assumptions • Useful for managerial intuition Decision Models -- Prof. Juran
Elements of an Optimization Model • Formulation • Decision Variables • Objective • Constraints • Solution • Algorithm or Heuristic • Interpretation Decision Models -- Prof. Juran
Toomer Sporting Goods Decision Models -- Prof. Juran
Managerial Problem Definition Ishani Mukherjee must decide how many to produce of two products. Decision Models -- Prof. Juran
Managerial Problem Definition • 2-piece Yellow Jacket • 4-piece Sachin Special Decision Models -- Prof. Juran
Formulation • Define the choices to be made by the manager (called decision variables). • Find a mathematical expression for the manager's goal (called the objective function). • Find expressions for the things that restrict the manager's range of choices (called constraints). Decision Models -- Prof. Juran
Decision Variables Decision Models -- Prof. Juran
Objective Function A mathematical expression of the manager’s goal in terms of the decision variables. Decision Models -- Prof. Juran
What is the objective? Maximize or minimize? Decision Models -- Prof. Juran
Constraints • Find expressions for the things that restrict the manager's range of choices, in terms of the decision variables. Decision Models -- Prof. Juran
Leather Constraint • Each Yellow Jacket uses 4 ounces of leather and each Sachin Special uses 5 ounces. • There are 6,000 ounces available. Decision Models -- Prof. Juran
Leather Constraint Decision Models -- Prof. Juran
Nylon Constraint • Each Yellow Jacket uses 3 meters of nylon and each Sachin Special uses 6 meters. • There are 5,400 meters available. Decision Models -- Prof. Juran
Nylon Constraint Decision Models -- Prof. Juran
Cork Constraint • Each Yellow Jacket uses 2 ounces of cork and each Sachin Special uses 4 ounces. • There are 4,000 ounces available. Decision Models -- Prof. Juran
Cork Constraint Decision Models -- Prof. Juran
Labor Constraint • Each Yellow Jacket uses 2 minutes of general labor and each Sachin Special takes 2.5 minutes. • There are 3,500 minutes available. Decision Models -- Prof. Juran
Labor Constraint Decision Models -- Prof. Juran
Stitching Constraint • Each Yellow Jacket takes 1 minute of stitching time and each Sachin Special takes 1.6 minutes. • There are 2,000 minutes available. Decision Models -- Prof. Juran
Stitching Constraint Decision Models -- Prof. Juran
Nonnegativity Constraints • Each Yellow Jacket takes 1 minute of leather and each Sachin Special takes 1.6 minutes. • There are 2,000 minutes available. Decision Models -- Prof. Juran
Nonegativity Constraints Decision Models -- Prof. Juran
Solution Methodology Use algebra to find the best solution. (Simplex algorithm) Decision Models -- Prof. Juran
